Repo Rate Cut in this Monetary Policy is RBI’s Festive Season Gift

Urjit Patel’s first Monetary Policy Report notes that while a number of factors have contributed to a relatively benign inflation environment and the MPC envisages inflation to trend towards 5 percent by March 2017, the MPC does note that there are risks of upward adjustments to this projection.

NEW DELHI: Commenting on newly appointed RBI Governor’s first significant policy announcement, Bobby Parikh, Chief Mentor & Partner, BMR & Associates LLP stated, “The outcome of the deliberations of the first Monetary Policy Committee meeting, is a reduction in the policy repo rate by 25 basis points to 6.25 percent. With this rate reduction, the Reserve Bank has brought down the repo rate by 175 basis points January 2015. Along with the reduction in the policy rate, the RBI has maintained an easy liquidity stance.”

Both these factors, combined with the marginal cost based lending rate regime for banks, ought to translate into reduced costs of borrowings for companies and individuals.

“In its Monetary Policy Report, the RBI notes that while a number of factors have contributed to a relatively benign inflation environment and the MPC envisages inflation to trend towards 5 percent by March 2017, the MPC does note that there are risks of upward adjustments to this projection.” Parikh said.

Industry came forward on RBI’s move to cut Repo Rate by 25bps and called this as RBI’s gift for this festive season.

Rajeev Jain, CFO, Intex Technologies (India) Ltd said,”With festival time around the corner this is the biggest Diwali gift, the Central Bank could give to consumers. We feel Banks & NBFCs will directly benefit by the 25bps fall in interest rate. We also hope that it will be passed on to consumers resulting in recovery of consumer sentiments, thereby giving boost to consumer durables and housing demand during this festive period through cheaper financing and loans.”

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